About a year ago, I attended an online advertising event in New York, where several retailers complained about affiliates who were distributing their ads via adware. The retailers claimed that they had no idea that those affiliates were working with adware on their behalf. Some of the merchants had chosen to cut ties with a number of these affiliates once they made this discovery. Seems reasonable enough, right? So here we are a year later, and there are still many organizations that don't have enough reliable information to determine with whom they should partner.
Why don't advertisers know more about their affiliate partners? And given the relative risk of NOT knowing, what does this mean for those who are looking either to enter or to increase their web presence via affiliate channels? At the very least, it means Caveat Emptor (or perhaps more exactly: Caveat Mercator).
Regulators and affiliate liability
Let's start with the most immediate risk: legal liability. Increasingly, we've seen companies brought to court -- and made to pay significant fines -- because of discernable actions of their affiliates. For example, in early 2005, and the FTC in cases related to email marketing, adware and telemarketing.
The clear message here is that regulators are increasingly holding online businesses accountable for things that take place beyond their organizational walls. And in the context of affiliate marketing, this is particularly problematic -- as transparency has not always ruled here. In other words, it has not historically been easy to know exactly what affiliates are doing on your behalf. Fortunately, that's starting to change.
As things stand, however, the amount and type of information provided can vary from network to network-- and even from individual affiliate to affiliate. Some will provide basic campaign metrics; others will indicate general ad placement; and a few will detail where and how ads show up. For example, Liane Dietrich, vice president of merchant services at LinkShare reports that her company provides merchants with "origins of referral traffic" as well as contact information for affiliates.
Is this 'enough' information? It's certainly a nice start. And realistically, one can only expect so much from the affiliate networks. But advertisers should seek more information-- and not solely to keep out of the watchful eye of Regulators. Here's why…
One of the best things about the internet is that it allows that entrepreneur, working out of her garage, to change the world-- or at the very least, to eke out a living. However, when there are a number of companies with little or no skin in the game, some of them are going to try to cut corners. For example, a common complaint is that certain affiliates are undercutting their retail partner's internal programs. "We want our affiliates active at the beginning of the sales cycle," says John Hoge of the online retailer SeaEagle.com, "not stepping in at the very end." Unfortunately, "some affiliates find it easier to let our own offline marketing do all that hard work, and then spend $.10 for a Google keyword buy on our trademark or model name."
And even if your organization weeds out a 'bad' affiliate, the affiliate will often resort to working with various intermediaries in order to continue operating on your behalf. Similarly, when an ad network or search engine weeds out a bad affiliate, they will often sub-contract out to the super affiliates and other intermediaries. This presents a huge compliance challenge-- even for those companies in the chain who ARE trying to do the right thing. As one senior person at one of the large search engines once told me, "Every time we catch the bad guys and kick them out of our network, they simply find another company to work with, and another way into our network. It's like playing whack-a-mole!"
Adding to this challenge is that many in this space are reluctant to speak publicly about these issues, partly because they fear giving away trade secrets. But this very lack of public information is creating issues for those seeking to do the right thing. Despite these challenges, I do think there are some ways for advertisers to obtain additional transparency from their affiliate partners.
Demand transparency from your affiliates
The first step is to determine what you want out of your affiliate programs. Most advertisers do a pretty good job of outlining budgets, basic campaign metrics, how much to pay per lead/sale, and so forth. But it's equally important to really think about what types of partners you want to work with. For example, some high end retailers don't want to appear on coupon websites because they think this devalues their brand. Others don't want to have their ads distributed via adware, while others don't want ads to appear next to political content. Merchants can obtain some of this information from the affiliate networks. And savvy merchants, rather than relying exclusively on the affiliate networks, are conducting their own due diligence.
Getting some help
Having said that, I do believe the affiliate networks can provide some valuable assistance. For example, LinkShare provides a software program called Athena that verifies affiliate identities, which means it can be an "effective tool for transparency,"according to Dietrich. Moreover, LinkShare provides tools such as an Affiliate Content Spider and a 'Find New Affiliates' tool which enable merchants to create partnerships with affiliates that meet their criteria.
Similarly, AzoogleAds provides their top tier merchants with access to the information regarding nature and placement of ads served via their publishers. And Commission Junction provides a service that can help monitor your transactions on the back end. This helps to ensure that your publishers are distributing ads appropriately. Although they charge additional fees for this service, Lisa Riollo, SVP of business fevelopment at CJ believes that the ability to "spot potential problems as they occur can be an extremely useful compliance tool."
There are also some outside companies that offer additional services. Cyveillance, NameProtect or Adgooroo, for example, all offer variations on trademark and ad monitoring. The services are somewhat similar, but can go beyond what the affiliate networks provide-- giving advertisers a clearer picture of where their ads are showing up, and how their brands are being represented.
Share information internally
I've spoken with a number of affiliate managers who insist that they don't work with ANY of the bad guys. However, it turns out that a colleague three cubes down from them IS working with these companies. While I recognize that you may be competing for revenues with other departments, if you aren't sharing information within your organization, then you aren't optimizing your programs. In other words, a silo-ed approach won't help you keep the bad guys out, and may ultimately cost your company more money as you're competing against other business divisions.
I've used the word transparency a good deal in this article. It's one of those terms many use, yet few seem to agree on exactly what it means. To some, transparency simply means keeping the bad guys out of your network and/or away from your brand. To others, it means providing enough information about potential business partners so that everyone along the chain has a clear understanding of the essence of the bargain.
As the affiliate channel becomes an increasingly important component of many advertisers' overall mix, I see more organizations adopting the latter approach. The affiliate networks have started to take steps to provide more transparency to their top tier clients, albeit at a higher price. The network that does the best job of executing this will have a significant advantage over their competitors. Advertisers would be wise to invest additional time over the next several months to determine which network is better suited to meet their goals. Caveat Mercator isn't just about compliance-- it's about maintaining brand value.
Alan Chapell, CIPP, is president of Chapell & Associates, a consulting firm that helps direct marketers navigate the waters of consumer privacy and develop responsible and effective marketing programs. .